Expert panel holds hearings to consider stronger unconscionable conduct law for franchising

The Franchise Council of Australia and other franchising industry figures have taken part in a discussion session with the Federal Government’s expert panel examining whether unconscionable conduct laws for the franchising sector need to be strengthened.

The panel, set up by Small Business Minister Craig Emerson, has been tasked with considering two options to strengthen laws around unconscionable conduct: the introduction in the Trade Practices Act of a list of examples of conduct that is universally agreed to be unconscionable or the introduction of a statement of principles of unconscionable conduct.

Franchise Council chief executive Steve Wright, who attended yesterday’s meeting with the three experts, Professor Bryan Horrigan, David Lieberman and Ray Steinwall, is opposed to the two suggestions.

He argues that existing parts of the Trade Practices Act and case law are adequate to safeguard the sector from unscrupulous operators.

“It’s not broken, the mechanisms are there,” Wright says.

“If you create a new set of laws that apply to franchising only, all you do is create confusion about which set of laws would apply.”

Wright and the FCA are also firmly against the idea of adding a list of examples or principals to the TPA.

“The FCA considers that the whole concept of providing “examples” or “principles” of unconscionable conduct is fundamentally flawed. Any consideration of unconscionable conduct requires a consideration not of individual acts in isolation, but of conduct in all of the circumstances.”

The FCA is also concerned with a suggestion that franchisors accused of unconscionable conduct would have to prove that their behaviour was reasonable – a reverse onus of proof to Australia’s traditional “innocent until proven guilty” legal system.

“That’s a major change in the way we, frankly, treat justice in this country,” Wright says. “It would obviously open up the ability for people to make accusations whether they were worthy or not.”

While the panel has requested that much of yesterday’s session be kept confidential, Wright is hopeful that the panel’s final report will not recommend amendments to the TPA.

The report is due to be handed to the Government by the end of January, although it is not known when the Government will respond.

The sector will also wait to see whether the Government enshrines its proposed changes to the Franchising Code – including improved disclosure by franchisors, higher penalties for misbehaviour and new powers for the ACCC to conduct random audits – in law.

The reforms appear to have one broad support from the sector, although Wright would like to see the ACCC conduct a major education campaign if its random audit powers are granted.

“We do think that is quite a strong potential change and used constructively that could have a very positive effect. If it was used indiscriminately, it could have a very negative affect, but the way the ACCC has operated in last few years I don’t think they would do that.”